To Refer, Or Not To Refer? OIG’s Outdated Health Care Referral Restrictions

By Drew Barnholtz

The Office of the Inspector General, which enforces Health and Human Services, has long been averse to referral services that don’t meet certain criteria.  To get protection against a possible enforcement action, the referral service can’t exclude anyone from participating in the service, and payments for referrals have to be reasonable and cannot be tied to the volume or value of the referrals that are made.  All this complexity doesn’t simply keep referral services from earning a legitimate living; it denies patients access to superior healthcare options.

In a time when patients gravitate toward online resources, the OIG’s restrictions on medical referrals appear horribly out of date. Generally, when people want to find a pharmacy, lab, or doctor, they ask a friend or family member. In many circumstances, though—such as moving to a new city and not knowing anyone—people are likely to go online.

Here they will find numerous referral services that can steer them to many reputable providers, who are often happy to pay for the hookup. This type of commercialized referral happens all the time in privatized industries—but because the government pays for healthcare (in the case of Medicare and Medicaid), it gets to set the rules for that space. Many of these rules are legitimately designed to protect against fraud and misuse of public funds, but that shouldn’t make them impervious to revision.

Thankfully, this has not escaped the notice of referral services and even the OIG, which has issued some enlightened opinions on the matter; case in point, No. 11-18. In 2011, a web-based provider of billing, electronic record, and patient messaging services asked if it could offer a coordination service whereby physicians could pay a transmission fee for connecting to other providers in order to share patient information, provider numbers, and clinical data. 

In response, the OIG determined that this service would not be afforded protection under the safe harbor, but it would not necessitate enforcement action either. In this instance, and many others in today’s marketplace, the referral service isn’t a health care provider that bills the government, but a third party provider of software and services.  What would be the harm of facilitating the transmission of information between referring providers so that a patient can receive care?  Here the OIG acknowledged that the fee structure was fair market value, that it would be assessed whether or not a patient followed through, and that it was unlikely to influence a provider’s decision to refer to any particular person or entity.

When the referral services safe harbor was drafted it made some sense for the OIG to suspect that an online referral service could charge a fee to steer patients to a particular provider, thereby exploiting federally reimbursed services and products.  However, in most cases, online referral services are there simply to expand access to care, allow patients to have more choices, and help them find options that best suit their needs. 

In any other industry it makes perfect business sense for a referral service to charge its users a fee in order to recoup the cost of implementation (if any) and achieve a profit. It’s high time the OIG gives medical referral services the air they need to do the same. Modifying the safe harbor could take a lot of time and effort, but the OIG can take it upon itself to revise its interpretation of the safe harbor’s requirements without having to turn a blind eye to the law.

Drew Barnholtz of Ifrah Law serves as an outside general counsel and compliance officer for skilled nursing facilities, hospice providers, home health providers, physician practice groups, durable medical equipment companies, pharmaceutical and start-up businesses. Drew has served as a general counsel and compliance officer for numerous health care organizations, and has firsthand experience assisting organizations in responding to government investigations (including serving as the Deputy General Counsel of Invacare Corporation, and the Assistant General Counsel for University Hospitals Health System). Drew also advises clients on commercial transactions, acquisitions & divestitures, compliance, licensure, bond financing, and a variety of agreements.

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